Short-term income protection sales are very close to stalling, a direct to consumer provider has reported.
Provider iProtect said while the FSA's final guidance had provided much-needed clarity on STIP, the continued associations with PPI by the regulator was building "unfair" negativity around the product.
Dennis Haggerty, marketing manager at iProtect, said: "There is a lot of work to do for STIP. Getting past this PPI barrier is an enormous conundrum. It is not something the regulator is saying is a brand new product it is pulling it into the same category as PPI.
"Our STIP sales are much lower than they should be and the market is very close to stalling. There is a massive lack of awareness among consumers and the name has not helped it either. It should have been something really obvious whereas what we have now is "STIP" which is almost just industry jargon."
He said work needed to start with how the products appeared on the Money Advice Service (MAS) followed by the industry proving that the products pay out.
Haggerty will be attending a meeting between the Protect Association, the FSA and the Office of Fair Trading on 26 February to raise concerns about the regulator's final guidance on STIP and the future of the product.
Steve Devine, chairman of Protect, said: "The regulator has labelled it in with PPI and it is a bit unfair. It is a real challenge for providers. I hope the product does survive because the fact is the vast majority of the working population cannot afford the more holistic plans.
"Unfortunately this type of product is always going to look like PPI but if STIP does not fill the gap left behind then I do not know what will."
